Accounting for Natural Capital

Measuring, valuing and monitoring natural capital assets

Through this service, we can help our clients answer questions like the following:

Which natural capital assets do you manage?

What benefits do they provide for you and others?

Are you spending enough to maintain those assets and sustain their benefits?

Financial accounts provide a register of physical and financial assets, and a record of changes over time. Through these accounts, companies can measure the depreciation of their physical assets and make provision for their future replacement.

National accounts measure the flows of goods and services in the economy year-on-year, enabling the changes in the economy to be tracked.

However, neither financial nor national accounts provide sufficient information about natural capital assets, which the economy depends on and impacts. Accounting tools for natural capital are developed to plug this gap.

Natural capital accounting tools use familiar frameworks that are similar to financial and national accounts. This allows audiences to better understand the biophysical and economic evidence for natural capital. The tools include:

asset registers that show the quantity and quality of natural capital assets

environmental profit and loss accounts that show the flows of costs and benefits over the accounting period - in a framework akin to a traditional income statement, and

corporate natural capital accounts that show the change in the quality and quantity of the stock of assets and liabilities – in a framework akin to a financial balance sheet.

We have also been testing these tools to include impacts and dependencies on social as well as natural capital.

Our portfolio on natural capital accounting highlights projects for three types of clients:

Publicly Listed, Private and Public Sector – environmental profit and loss, and corporate natural capital accounts for an individual site; all the landholdings of an organisation; impacts of switching from conventional to organic farming; impacts along the supply chain of a company and social impact of long-term stable contracts on supplier sustainability

Local Authority – using the concept of natural capital, economic value and accounting concepts to help local authorities to demonstrate local economic, and human health and wellbeing benefits of green infrastructure to support the case for future investments

National Accounts – for Defra and the Office of National Statistics for woodlands, the marine environment and the urban green infrastructure to show the stock of natural capital assets, the flow of benefits they produce and spending on maintaining those stocks and/or flows